You can expect your life to change in significant ways when you marry for a second (or subsequent) time. As with all major life events, marriage calls for an estate plan review. Even if you removed your former spouse's name from estate documents when you were first divorced or widowed, you'll want to review your will, trusts, health care directives, powers of attorney and other estate planning documents to ensure that your current wishes will be carried out.
The risk is that you might unintentionally benefit your former spouse or former spouse's family or give them control over your affairs. And if you have children, you'll need to make sure their interests are protected. Here are three important actions to consider.
1. Weigh the Value of a Prenuptial Agreement
People with children from a previous marriage sometimes want to leave the bulk of their estates to them — particularly if their new spouses are financially independent. However, the laws in most states make it difficult to “disinherit” your spouse. For example, many states provide a surviving spouse with an “elective share” — typically between one-third and one-half — of the other spouse's estate, regardless of the terms of his or her will or living trust.
But you can use a prenuptial agreement to waive your respective rights to each other's property. These agreements can also be used to serve a variety of other purposes, including retaining control of a business and defining premarital assets and debt.
2. Check Your Beneficiaries
You probably want your new spouse or children to be beneficiaries of your life insurance policies, annuities or retirement plans. So make sure you've updated these designations. Keep in mind that if you name minor children from your previous marriage as beneficiaries, your former spouse would likely become their legal guardian and gain control over their assets. If this scenario is unacceptable, consider designating a trust as beneficiary for your children's benefit.
Irrevocable trusts may also require action. Some trusts provide that a spouse's rights terminate automatically in the event of divorce. But if yours doesn't, you'll need to change it. Also find out whether your divorce decree grants your former spouse any rights with respect to life insurance, retirement plans or other assets. If the answer is “yes,” your ability to update certain beneficiary designations may be limited.
As you name new beneficiaries, be aware that your new spouse may have mandatory rights to certain assets, such as qualified retirement plans. If you wish to name someone else as beneficiary — a child from a previous marriage, for example — you'll have to ask your new spouse to waive these rights in writing.
3. Look into a New Trust
If you leave wealth to your spouse outright, there's no guarantee that he or she won't spend it all or share it with a new spouse, leaving your children from your previous marriage with nothing. Certain types of trusts can help you avoid this result and ensure that all your loved ones are provided for.
For example, you might establish a living trust for your new spouse (and any children you have together) and a separate trust for your children from your previous marriage. Another option is to set up a trust that provides your new spouse with income for life and preserves the principal for your children.
Don't Get Distracted Wedding plans and details related to combining households and blending families are probably taking up much of your time and attention these days. But don't use them as an excuse to neglect what's arguably an even more important plan.